Financial Aid Defined

Financial aid is money that the
government and other organizations give you or lend you so you can pay
for college. To qualify for financial aid, you have to apply.

What should parents know about financial aid?

Jeanette Arnhart, Latin American and Latino Studies Outreach, University of Arkansas

Sources of Financial Aid

Financial aid comes from these sources:

The federal government (the largest source)

State governments

Colleges and universities

Private organizations, such as companies, clubs and religious organizations

Banks and lending companies

Types of Financial Aid

There are four main types of financial aid.

Grants

Grants
are called gift aid because they do not have to be paid back. Grants
come from federal and state governments and from colleges. Most grants
are need based, which means they are usually given based on your or your
family’s financial circumstances.

Scholarships

Scholarships
are also gift aid. Scholarships come from governments, colleges and
private organizations. They may be awarded for academic or athletic
ability, interest in a certain subject, or volunteer work, for example.
Some scholarships are given based on membership in an ethnic or
religious group. Companies may also give scholarships to children of
employees.

Loans

Borrowing money from a bank, government
or lending company is called taking out a loan. A loan must be paid back
with an extra charge called interest. The federal government offers
low-interest loans to students with financial need. Other lenders charge
more interest.

Work-Study Programs

The Federal Work-Study Program offers paid part-time jobs to help students pay for part of their college cost.

Net Price

Net
price is the real price that a student pays to go to a college. It’s
the published price of the college minus the gift aid that the student
receives. The net price of a college is often much lower than its
published price.

Most colleges now offer a tool on their websites
called a net price calculator. This online tool gives you an estimate of
the actual price you would pay to go to a certain college, based on
information you enter about your finances.

Your net price will be
different for every college, so it’s a good idea to use each college’s
net price calculator. Visit a college’s profile in College Search to access its net price calculator.

When to Apply for Financial Aid

October 1 of the year before you plan to go to college is the first day you can file
the FAFSA. For example, those students attending college in the fall of 2017 will fill out the FAFSA in the fall of 2016 using 2015 tax information (called the "prior, prior year"). College, state and private financial aid deadlines vary. Aim
to file the FAFSA as soon as possible; remember that
financial aid dollars are limited, and in many cases are awarded on a
first-come, first-served basis.

Don’t Rule Out “Expensive” Colleges

Keep
in mind that a college that charges a lot for tuition might offer you
generous financial aid. It might even be more affordable than colleges
that charge lower tuition. So think about net price, not published price
— and don’t be afraid to apply to colleges you think you can’t afford..

Once you hear from the colleges you’ve applied to, compare your financial aid offers to see which options are best for you.